BBVA presents a series of commitments to the CNMV to approve its merger with Sabadell

BBVA has presented a series of commitments to the National Markets and Competition Commission (CNMC) to address competition issues in relation to its proposed merger with Banco Sabadell.

The measures aim to safeguard financial inclusion, sustain credit to small and medium-sized enterprises (SMEs) and guarantee competitiveness, particularly in Catalonia and the Valencian Communitywhere both banks have a strong presence.

Key aspects of the proposal include BBVA’s commitment to not closing branches in areas where competition is limitedas well as a guarantee of maintaining commercial conditions for individuals and SMEs in postal codes served by fewer than four financial institutions.

In addition, the bank has committed to maintaining all capital lines for SMEs during the 18 months following the merger and to preserve the total volume of credit for SMEs that operate exclusively with BBVA and Sabadell during the same period. BBVA has proposed maintaining price standards for SMEs at the national average and guaranteeing transparency in changes to commercial policies for Sabadell clients.

“These commitments largely mitigate the risks identified by the CNMC, which are mainly focused on certain territories,” BBVA said in a press release.

In September, BBVA won approval for the merger from the European Central Bank, but Spain’s independent competition regulator demanded additional guarantees to avoid a deterioration in competition in the market. Carlos Torres Vila, president of BBVA, described the ECB’s prior approval as a “significant milestone” that underlines the solidity and solvency of the plan. He also highlighted that “there are no competition problems in the operation with Banco Sabadell.”

The risks of the BBVA-Sabadell merger posed by the CNMV

In its detailed report published on Wednesday, the CNMC raised several concerns arising from the possible merger. Although the merger would not create municipal monopoliesthe combined entity would dominate in up to 50 locationswhich would lead to duopolies that could limit consumer choice.

A particularly worrying issue for regulators is the risk of reduced availability of credit for SMEs due to the different levels of diversification of the two banks.

The CNMC also points out the risk of branch closuresespecially in underserved rural areas. The report highlighted the dependence of certain demographic groups, such as the elderly and the economically vulnerableof physical banking services. The potential closure of branches in these areas could force residents to travel long distances to bank in person, exacerbating financial exclusion.

In addition, the CNMC expressed concern about the possibility that BBVA automatically transfers Sabadell clients to their own products, possibly under less favorable conditions. The lack of transparency during these transitions could worsen the conditions of clients, especially if they are unaware of better alternatives within BBVA’s portfolio.

The market for the acquisition of services and management of point-of-sale terminals has been the subject of special scrutiny. The merged entity would become a national leader in this market, with a market share greater than 30%. The CNMC warned that this could lead to higher fees for companies that rely on these services, such as higher commissions or monthly fees.

Next steps and possible impacts of the bank merger

The CNMC has sought input from interested parties, including consumer groups, SMEs and competing financial institutions, within the next ten days. This information will be part of the second phase of the investigation, which is expected to extend until 2025.

If approved, the merger would create one of the largest financial institutions in Spain, consolidating significant market power in key regions. “The combination between BBVA and Banco Sabadell, once approved, will create a stronger and more efficient institution that will be better prepared to compete on the European and global landscape,” BBVA said in a report last month.

In Spain, would be the second most important banking group in terms of market share in loans, with total assets of 265,000 million euros. According to BBVA, the integration is expected to offer a more diversified client offering by capitalizing on the complementary strengths of both banks: BBVA’s focus on retail and large corporate clients, and Sabadell’s strong presence among SMEs.

The reactions of the IBEX 35

BBVA shares fell 0.7% during midday trading on Thursday, marking the third straight session of losses. The drop was mainly due to the deterioration of risk sentiment amid the escalation of geopolitical tensions between Russia and Ukraine, reflecting the downward trend observed in Spain’s IBEX 35 index.

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Banco Sabadell shares they fell similarly by 0.7% during the session.